4.24 | Your Wealthy Year In Review

>> Isha Vela: Welcome to Devotional Anarchy, a podcast about intimate, embodied leadership that is radically human, honest af, and thereby inherently disruptive to systems of disempowerment and disconnection. I’m Isha Vela, trauma psychologist, certified somatic practitioner, wealth wizard, licensed financial professional, leadership coach, and intuitive business mentor. You’re here because, you know, self intimacy and self knowledge is the source of everything you want to create in your life. And that building safety and trust in your body is what allows you to fully own and store your energy in the direction of your desires. This season, get ready for deep dives into wealth building spirituality, emotional leadership, and human centered business with an activist twist. The conversations and tools shared in this podcast are your permission slip to manifest a life and business that lights your soul on fire and supports collective liberation.

This podcast is about debt and how to avoid getting into debt

Welcome to this episode of the podcast where we’re going to be talking about debt and looking at debt holistically, looking at it from a strategic perspective, like thinking about how to pay it down. we’re looking at it from a systemic view, really understanding it historically and then obviously psychologically, and also ways to avoid getting into debt. So I felt it was important to talk about debt because we are days away from the start of the holiday season. I have a Black Friday offer, millions of people have Black Friday offers right now. And from the forecast, from what I’ve been hearing, it sounds like people are buying less stuff which makes me so utterly happy. They’re buying less things, more experiences and we’re seeing this trend all over the place. I know that if you’re listening to this you’re probably not a super big consumer. I haven’t been either for many years. I’ve been doing experience based gifts for like maybe six or seven years now and occasionally getting something that the kids need. But generally speaking like not really engaging much in the whole holiday sales and things like that. Yeah. And I am one payment away also, from the debt that I inherited when my ex husband passed away. It was $18,000 that I inherited and it was from a line of credit that we took out with my credit score. And this was meant to go to basically be the startup costs for a business that he was starting and I was happy to support him in that. What I didn’t know at the time was when you have a partner who basically defaults on payments or pais later, it obviously affects your credit score. I didn’t really know those things at the time. And yes, I’m only one payment away. It’s been Sort of a really aggressive focus. Since last year. Since I inherited last year. Inherited it last year. And I’ve been really, you know, even though the interest rate isn’t that high, it’s 11%. But it was like a symbolic debt that I felt was really important to like be free of. It’s, I mean, and this is like a 20 year old debt. So it’s been around since like my college days. Yes, it’s exactly 20 years. We took it out in 2000. Yeah, 2004. Yep. It’s been that long. And I’m just one payment away. And this is how I want to end. My 20, 24 is being debt free, with the exception to some medical debt from my uterus removal. But I don’t care about that because it’s 0% and I get to pay that down very, very slowly. But yeah, there’s a psychological weight to the debt that looking forward to being free of. And you know, because I’m on the back end of people’s finances, I often see, you know, how deeply in debt people are. And I just want to say that if this is you, you know, obviously people have their own responsibility in situations that they get into. But we also have to look at the bigger context. We also have to look at the historical context of debt. We also have to look at the, at the systemic piece. Right. Because I think that we just look at being in debt as a moral failure. Then we’re really like, we’re really gaslighting people and we’re really harming people. So I think that that’s something that I want to acknowledge in this episode as well. yeah.

The origins of the debt cycle starts off with us wanting more

And so like, let’s begin there perhaps, you know, the debt system essentially was created to disempower us and trap us in a cycle. And the first time I really understood sort of the origins of the debt system was when read, when I read this particular chapter in the book Sacred Economics by Charles Eisenstein. And it’s an incredible book. I haven’t gotten through it yet, but there’s this one chapter where it describes sort of the beginning of the debt cycle. The origins of the debt cycle, if you can believe this, starts off with us wanting more, with our material desires, becoming more profitable, growing, expansion, growth, but from a place perhaps of ego, of not also being grounded in the simplicity of enoughess and sufficiency. And so it was set up for us to borrow in order to get ahead. And then we had to work harder in order to pay back to Our creditors. And that’s often exactly what we see with people from all walks of life who are wanting to achieve something now, and leveraging credit card debt, for example, or loans, in order to get ahead. And that’s exactly what got me into my debt situation. and the problem was that we kept borrowing against it whenever we were in some financial trouble. And at 11%, it wasn’t a super horrible deal. It wasn’t like a 25% debt. But nevertheless, it’s been 20 years, and it’s really like, it’s time. yeah. So I just wanted to offer a little bit of that context. I think that the way Charles Eisenstein explains it in the book is that there were these chicken farmers or some sort of farmers. And these farmers were perfectly happy. And then they had enough food, enough to eat. They were just kind of getting by and they were fine. And then someone came along and told them, hey, you can do more. You can do better. You can sell these sheep and make a profit. And they were like, yeah, how? Oh, you can buy more sheep and then do this and do that. And they were like, oh, that’s a great idea. Okay. And then, well, how do I get more sheep, though? Well, we’ll let you borrow the money to buy more sheep. And then. Then you see the debt cycle, and then they’re having to work harder to pay back the creditors. And then it didn’t quite work out the way they planned, and so now they’re in the holle. So, it’s been this focus on this aspect of business, of uncapped growth, in business or, the desire to be more profitable, and then borrowing to get ahead and then having to work hard in order to pay it back. You’re working to pay off creditors. That’s basically what we see people in. And again, being on the back end of people’s businesses. Like I said before, a lot of people right now, what I’m observing. And maybe this is you during COVID At the beginning of COVID you experienced some sort of interruption in your work. maybe you were a photographer. And so you were due, obviously in person stuff, and everything got like your wedding photographer or you were, Yeah, maybe you worked in a restaurant and you had to, like, pivot to, I don’t know, maybe you were a waiter or a waitress or, you know, any number of things could have, like, interrupted your experience. In Covid, a lot of people experience interruptions. Like, even, folks that I know who were in the movie industry or, you know, just Things that were in person. And luckily I wasn’t so much because I just went from in person to online. And that was like an easy enough transition. But even then I experienced some interruptions in other ways in that I switched to going from being a therapist. I decided to be an entrepreneur during a time where it’s like it was a shaky economy and I took a huge risk. And I did take a hit also for that first year. but yeah, like, I see a lot of people impacted by Covid and that they’ve had for the last, let’s say, two years, they’ve had to rely on credit cards in order to pay their everyday expenses. Just basics like groceries. And so they’ve gotten pretty deep in the whole. And now maybe since late last year or early this year, maybe they’ve gotten the employment that they’ve been looking for. They’re making good money now, but now they have this huge debt to pay off and it’s sucking basically, like, I don’t know, 30 or more percent of their cash flow. So most. Well, I guess that amount of money or a third of their money is going to paying back the debt, which feels really shitty when you’re finally making money and it’s all going to debt and you don’t experience yourself as having a better, lifestyle or an improved lifestyle from what you were living before. Right. And we’re all also experiencing higher expenses generally. So if your income has stayed the same through the four or five years of COVID almost five years now, it’s a couple of months away from being five years. If you’ve had the same level of income, you may relying on credit cards more, or you may be slowly getting into debt because your living expenses are going up, food is going up, rents, are going up, but your income has stayed the same. So this is what I’ve been seeing with a lot of people. And of course people feel really ashamed about that. But it’s like I tell people, like, okay, circumstances got you here and we’re going to get you out. Like, there’s no moral failing here. you just did the best that you could do under the circumstances that you were in. And, because people have had to hold back for a long time, they’ve had to put their dreams on hold while they’re living off of credit cards and doing, or just living with a lot less. When they finally come to see me, they want to make all these really big moves. They want to buy a house or they need a new car and they’re ready to buy it, but they’re actually not ready because they are in a recovery period. They’re in a Covid recovery period where it’s like right now all that’s needed to do is just like, let’s just focus on paying off the debt, getting that credit better so that, when you do buy the car or you do buy the home, you’re not ending up getting yourself into debt like another higher interest debt. You want to be able to access a lower interest rate so that you’re not paying double on your home or double on your car or whatever it happens to be. So, yeah, and just going back to the context of debt for a moment, like the historical context and the way that we are programmed to how that desire for more gets hijacked subconsciously. Because everything in our environment, from the moment that we are born, we are raised to be consumers. You see My Little Pony commercials and all these toys on television on Saturday morning cartoon tv. And so we have this, like, our desires are like there’s somebody tapping into those and sort of poking those and saying, oh, you want this, you really want this. And if you had this, you would be fulfilled and happy. You would be so, like, you would be free. And so they equate consumerism with freedom. And freedom is what every human being is. The real want is the deepest desire. And so we equate consumerism with freedom. So we often get into this buy now, pay later mentality because we want the instant gratification. Maybe we’re soothing ourselves by buying things. We don’t have the impulse control or we want to feel better. We want to regulate how we feel about a situation or about ourselves. And so we really need to do the healing work within ourselves and, and anchor in this sense of sufficiency and enoughness in order to be able to stop that behavior. It’s not just a matter of just like cutting up your credit cards. It really is a psychological shift, shift towards liberation and liberating yourself from the attachment to things, solving an internal issue. and I see people so with the kind of debt where it really looks death by 100 cuts, where you may have like, let’s say you have 10 credit cards and you’re paying the minimum on each, but they add up or the balances aren’t that high. But if you’re paying above the minimum, then it does end up, end up being like $1,000 a month or more. If you’re just paying $100 to each of them, and the cost of borrowing is really, really high. And depending on your credit score, your credit rating, it can really make a huge, it can really be like a, drain on your cash flow.

Rule of 72 helps you figure out how long it takes for money to double

So when you think about the interest rates on a credit card, I want you to consider for a moment the amount of time it takes for any amount of money to double. And the way that we teach that when we do comprehensive strategies with people is we use the rule of 72. And so the rule of 72 is just again, like I said, it helps you figure out how it takes, how much time it takes for any amount of money to double. And so we’re just looking at compound interest and growth, right? So you take the number 72 and you divide it by the interest rate or the interest growth rate, of return. If we’re talking about an investment. So that could be 1%, that could be 6%, that could be 10%. Obviously if you divide it by 1% you get 72. And that just means that it’ll take 72 years for any amount of money to double. And it doesn’t matter if it’s a dollar, it doesn’t matter if it’s $100,000, it’ll still take 72 years for that money to double. But then if you’re looking at 10% which would be a pretty decent rate of return for an investment, you’re looking at 72 divided by 10% which is 7.2. so your money’doubling every 7.2 years. So if you think that 10% is a good rate of return, imagine the rate of return and the bank is getting on your debt. That could be 25%. Sometimes I see it’s more often than not it’s 28, 29%. And I’ve even recently seen 33% which made my jaw absolutely drop. I’m like a third, A third. That was just incredible to see. So when you think about the doubling time being 7.2 years and if you double that doubling time, if you double the rate of return or the interest rate to 20%, that doubling time, that 7.2 gets cut in half, it could be 3 point something. I didn’t do the math in my head or on my calculator. So it’s somewhere around three years. And if it’s 28% interest then that’s closer to ah, doubling every one and a half to two years. So it’s pretty significant there. And yeah, s. Just even thinking about that is pretty stressful. And oftentimes people don’t know their numbers when I do strategies with people know their balance on their debt, but they don’t know the interest rate and they haven’t done the math. They haven’t taken the time to go with their calculator or some online calculator to figure it out. But I’m going to show you right now. You’re going to go on calculator.net which is my favorite financial resource, to just figure it out. You’re going to go to calculator.net and you’re going to go to financial calculators on the lower right hand side. You’re going to click on financial calculators and you’re going to go to debt repayment calculator and you’re going to plug in name of your debt, the amount you have in your balance, what you’re paying on it now, and the interest rate. And then you’re going to click compute or apply or whatever it is and you’re going to see how many years, based on what you’re paying now, how many years it’s going to take to pay down and how much you end up paying an interest. Because that’s the shocking part, because more often than not, when you’re paying $75 a month or $100 a month on a $6,000 debt, that debt you’re going to be paying $12,000 on that debt you’re going to be paying double the amount. So it’s like the cost of borrowing is so, so high. And yeah, you can’t afford it, you cannot afford it. So don’t do it. If at all possible, avoid it. But you need to know what those numbers are because you need to be in reality. And a lot of times we tend to avoid it. It stresses us out and we just want to have no part of it. We just want to put it away in a box somewhere. And so we ignore the realities of those interest rates. But confronting them, being in reality with them and being in relationship with those numbers actually is a lot more effective in helping us pay it down. And to be minding it and not making late payments or anything like that, you want to be on top of it. Yeah. So like I said, keeps you stressed out, it keeps you complicit in the system. Know a lot of people I know who are such righteous people, such good hearted people in terms of like they care so much about, they’re critical of late stage capitalism. They are wanting to overhaul the system, the money system and lots of different systems, but they are basically supporting the system by Having debt and paying the banks. And again, it’s because. Lots of different reasons, because, Lots of different reasons for that. I wanted to say, but I think that we have to really look at ourselves in that sense of like, okay, well, this is where I’m complicit, and this is why I’m complicit. I’m complicit because of personal choices I’ve made, and I’m complicit because of these systems that exist. And I can be critical of the systems, but blaming the system is not going to really behoove me. I need to take a responsibility and I can get myself out. Just really, like, whatever way you can get yourself out. I’m going to talk about some of those things in a moment. But, yeah, And I feel like as someone who really, values this experience of living in the now, like, I’m very much about present living in the now, enjoying life in this moment, enjoying the mundane moments of life. That’s all really beautiful, but obviously sometimes we go into YOLO and we’re like, oh, you only live once, and you live for the day and you got to enjoy now. And I’m all for that, but you don’t want to overextend. And there is this place where this YOLO meets the place where we actually are addicted, where we are, hooked into this. We got to do it now, and the moment and impulse, and we want to have that instant gratification. So that’s where we get into trouble. And with regard to addiction, I just want to say I was speaking earlier to. To the subconscious programming. So, you know, even as adults, we don’t really realize I gave the example of like, My Little Pony and toys and things like that. But even as an adult, I recognize in myself there are moments where I’m. You tempted to buy something. and this doesn’t happen very often, but once in a while or I. I can notice my attraction to something. Maybe something I see online. And it’s because it symbolizes the person that I want to be or the how I see myself. And I want to show that on the outside. And sometimes it doesn’t have much to do with luxury, but maybe it’s a way of expressing myself with a piece of clothing, for example. and I kind of noticed that. I noticed that on a subconscious level, like, I want to. There’s something that I want to be seen and I, you know, I want to be recognized for who I am. And these clothing is what is going to do it. And it’s like I kind of stop myself in those moments and I’m like, no, that’s really nice. And when you can afford it, you can have a couple of these clothing, these pieces of clothing. And of course we want to buy it from people who themselves are making it and maybe buying smaller boutiques and stuff like that. But to not have it be yes, a way to expression but also really being anchored in myself and being like, I don’t have to wear or look like anyway on the outside to be respected for who I am or to be seen because I see myself and I know exactly who I am. And really taking ownership of who you are and your self knowledge and so that you are not in a state of addiction, in a state of consumerism. Because there’s a way that getting out of debt isn’t just about the smart use of credit cards or about paying it off or having repayment strategies and things like that, but about also shifting from consumers, being consumers, identifying as consumers, to becoming a creator, identifying as a creator. and that’s sort of been my big shift is like as I’ve moved away from buying things and just like, I mean my consumerism was never very much, but I’ve always loved clothing and I’ve always loved getting myself little things and having little creams or whatever, almost from a self care perspective. But it’s like I don’t really need those things. And my process has been tort of detangle myself and detang myself from those places and thinking like, well, how can I create it myself? May I make my own beauty products now? And they’re very simple but they work. And it doesn’t take very much to DIY some of this stuff. So it really is about moving from a passive role of consuming and just taking in to almost like how an infant just kind of suckles and just receives whatever it’s given. And then moving into an active role where you are instead of just taking in whatever’s given to you is really like, okay, well what do I really want? maybe just using the metaphor of food, thinking about moving from being fed to growing your own food and feeding yourself. And that’s why I talk about financial sovereignty, like moving from dependency to sovereignty, disentangling yourself from the kind of energies that try to ensnare you around like, oh, you want this, you desire this. So I moving from a place of being an infant to being an adult and holding your own energy and deciding what you’re going to do with your money.

The system benefits from your poverty and yourness, your victimhood

Yeah. So I wanted to say that I felt like that was important to acknowledge and I. That I just want us to stop for a moment. And I hope that, by this point are. If you are carrying any shame around it, let this be your moment where you let that shit go. If not all of it, then some of it. And the system benefits from your poverty and yourness, your powerlessness, your victimhood, your dependence. There’s ways that the system does attempt to do that. I remember being in college, arriving at my college campus and being. Having credit card applications passed out, like, handy. I received tons of applications for credit cards in the mail, and I’m sure you do as well. So it’s always like, trying to like, hey, it’s almost like a drug dealer, like, hey, kid, you want some? Hey, kid, you want some? And you constantly having to say, like, no, no, thank you. No, I can take care of myself, or, no, I don’t need to do drugs to have fun. Thank you very much. So that’s sort of, what I connected to when I think about debt and sort of the systemic piece of it, and dependency. yeah.

You want to be aggressively paying down your debt if you have the means

And so let’s talk for a moment about ways to pay down debt. so I see a lot of people paying the minimum, which, if that’s all you can do, then great. But I would encourage you to be aggressive about it. If you’re in a position where you have some, some discretionary income, which is like, whatever you have left over at the end of the month, obviously you want to be funding your emergency fund, and I’ll talk about that more in a second. But you also want to be aggressively paying down your debt if you have the means to do so. And I say this in a very general way, I hate giving advice on this podcast, like financial advice on this podcast or on social media, because everybody is so different. Every situation is different. In some cases, I might be like, yeah, and don’t pay any more money to that debt. Like, go towards consolidation or don’t try to consolidate. That’s not going to benefit you. If you’re trying to do X, Y and Z, every person is different. What I want to do, though, is I do want to, encourage you to explore what your numbers are, especially your interest rate. calculate how much time it’ll take to pay back based on what your payment is. know how much you’re going to be paying towards interest and you might want to use. When you start paying it back, you might want to use the avalanche method which is using or payingest the card with the highest interest rate first or the debt with the highest interest rate first. You can also use the snowball method. the snowball method is just really taking the debt with the lowest balance and paying that off first, getting rid of it and that psychologically it can be really encouraging to see that debt eliminated and says, okay, we got two cards down, we got four to go, that kind of thing. And it can keep you really motivated. The avalanche method is more like the intention of it is to pay as little towards interest as possible. And so you’re paying off not necessarily the biggest debt, but the one that’s going to be sucking the most from your cash flow, which is usually the highest interest debt. and when it comes to, sometimes you will get to a point where sometimes consolidation is the option if you are in a situation where, you are not able to increase your income for whatever reason, you’re really kind of stuck in a place where it’s like, yep, there’s no way I can do this. I’m going under every month, I’m going under further with these interest rates, then consolidation might be, an answer. Consolidation, though I want you to consider that is usually one step away from declaring bankruptcy. So if you aren’t able to consolidate, yeah, I mean, consolidation, there’s lots of different factors involved, but if you don’t, your credit’s going to take a hit, basically is what I’m trying to say here when you consolidate. Because the idea is that you, when you stop paying the debt for like, I don’t know, six months to a year, the credit card companies then begin to be ready to start negotiating a deal. But in that time, you are going to see a change in your credit score and that’s going to affect whatever moves you make later. So it’s one step consolidation. Debt consolidation strategies are one step away from bankruptcy, which ends up being on your record for, you know, seven years.

Not all debt is bad, but some debt is actually helpful

So there’s obviously ways to use debt to make more money. So not all debt is bad, or unhelpful. I hate using the word bad, but some debt is actually helpful. Sometimes you do need to get into debt or if you don’t have any other means to, like if you have ah, startup cost for your business, sometimes you leverage a, ah, situation like mine where we had a line of credit. So that can be helpful in those situations, but we abused it over the time. sometimes you invest in education, you take out student loans, if it’s certain types of education, you invest a lot in student loans and then you see that you don’t really get a rate, a return on investment for that education. Not all education is the same. Some degrees, some investments in education will have a larger return on investment than others, which may not have any at all. So it’s always important to look at those differences. and then there are credit cards where you can accumulate miles and you can for the expenses that you would pay for anyway, you pay for them with these miles, credit cards, and then you can leverage those to travel so you don’t have to kind of build up a travel fund. Right. So there’s lots of different ways to leverage debt. Also, like with people buying homes, like a mortgage is debt. People say, oh, a mortgage is good debt. I don’t really believe that a mortgage is good debt. or leveraged debt, let’s call it leverage debt. Mortgage is leveraged debt if there is somebody else living in the house that’s paying rent or you have some form of income coming from that property. But just having a house that you live in is not actually the best use of debt. Believe it or not. That’s how I feel about that. I think the middle class has been taught that a home is showing that you made it. It’s a symbol of you having gotten into the middle class. And that renting is for losers or for students or for people who haven’t gotten to a certain level. But I don’t plan on buying anything unless I can rent it out or I can do something else with it that will generate income. Yeah. And sometimes paying down your debt involves getting a side hustle, increasing your income for a period of time in order to pay that off and then stay out of debt. and so a lot of people are in situations where, like I said earlier, their income hasn’t gone up, but their wages haven’t gone up, but their expenses have. So we are looking at a lot of situations where people just need to make more money, period. And sometimes that’s can be challenging to do. and as entrepreneurs, if you’re an entrepreneur, well, you have control over that. Nobody else is deciding how much you’re worth. You can really decide, okay, I’m going to make more money this and this and this way. So, yeah, so I think that’s sort of where I wanted to end up.

The reason people get into debt is often because they don’t have an emergency fund

Yes. I was going to talk about one more thing and how not to get into debt. And this is just a very, like a concrete thing. This is not so much a psychological thing. But the reason why people get into debt is often because they don’t have an emergency fund. And so if you’re an entrepreneur, you want to have an emergency fund for your business, at least three months worth, if not six months worth. Personally, you want to also have a three month emergency fund. And an emergency fund is three months worth of your expenses. Whether it’s business, it would be business expenses, and for personal it would be your household expenses. If you have someone living in your home that has a chronic illness, if you have a chronic illness, then you want to have six month of expenses. Because if you get taken out, if you eat the wrong thing and you have a massive headache for two weeks, that’s going to affect you being able to show up for your business or you want to at least, be able to pay for support, team, etc. To be able to run your business for you in the case that you’re not able to. I feel like that is really important because most people, statistically speaking, don’t have even the $400 to pay for an emergency. There’s lots of medical emergencies, there’s lots of car emergencies. Those things are always happening. Your kid needs something for school, there’s always something that’s going to be like pulling on the strings, pulling on your wallet. Basically what we went over today was really looking at the bigger view of debt. Looking at it instead of looking at it as a personal failure or a moral failure, looking at it in the bigger context historically of the origin of the debt system, but also what we’ve been living in for the last five years and why we are where we are. looking at the psychological aspects of debt, the way that debt keeps us stressed out, it keeps us in poverty and powerlessness, in lack of freedom, it’s death by 1000 cuts or 100 cuts, however you want to cut it. and to really know your numbers around your debt, not just your balance but your interest rate, and know how many years it’s going to take to pay back and how you can play with those numbers in order to pay it down in a shorter period of time. we talked about ways to pay down debt. We talked about the avalanche and the snowball method, ways to leverage debt and ways to increase your income so that you can pay it down quicker. We talked about being creators versus consumers. And I want to leave you with the fact that I offer complimentary financial strategy sessions with people and gratefully, thankfully, I am compensated well for my services in other ways. but if it’s something that you feel would be helpful and beneficial to you or somebody you know, please send them my way. If this, episode meant something to you, if it landed with you, if you had an aha moment or a light bulb, please send me a message. tag me on Instagram or on Facebook. I would just so appreciate the feedback. All right, I’m sending you love, and I hope you have a beautiful holiday season. Thank you for listening to today’s episode. Remember to hit the subscribe button to get notified of new episodes dropping on the new and full moons of each month. And if you haven’t already, leave us a five star review on itunes to make sure that everyone who needs this transmission receives it. Until the next episode, I’m sending you fierce, fierce love.